Typically, conservation of our natural environment is a public good with a wider than local impact. In our study, we analyse the acceptance, effectiveness, and incentive effects of Germany's dominantly command-and-control instruments of nature protection. With an extensive investigation into the status quo in four federal states (Bavaria, Lower Saxony, Northrhine-Westfalia, and Saxony-Anhalt) we establish that the instruments currently in use provide insufficient incentives for nature protection on the local level. Consequently, we investigate whether local authorities might undertake more activities of nature conservation and protection when stimulated by fiscal transfers that help to internalise the spatial externalities of nature goods. We model a simplified system of state transfers to the municipal level ("Kommunaler Finanzausgleich"). We test two mechanisms for additional transfers to those municipalities which engage strongly in nature conservation. The "landscape plan approach" (LPA) gives financial rewards for improvements of the local nature and wildlife as measured by the command-and-control instrument "landscape plan". The "nature points approach" (NPA), in the opposite, allocates transfers according to the valuation of different activities with the (new) instrument "nature points". The LPA conforms to the theoretical ideal, yet under reasonable financial restrictions it cannot give sufficient incentives for additional nature conservation on the local level. In contrast, the NPA can do so. Yet, one of the key problems, the sealing of soil surface, cannot be tackled with these transfers alone. Here, taxes or tradable permits must complement transfer policy.